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Press Release: IMF Initiates De-Escalation of Remedial Measures Against Liberia and Lifts the Declaration of Noncooperation

October 2, 2006

Press Release No. 06/210

Today, the Executive Board of the International Monetary Fund (IMF) decided to initiate the de-escalation of the IMF's remedial measures that have been applied against Liberia. Moreover, to encourage further reform efforts by the Liberian authorities and to provide a positive signal to Liberia's development partners, the Executive Board decided to lift the declaration of noncooperation that had been in place since March 30, 1990. The Board also decided that it could consider lifting the suspension of Liberia's voting and related rights following satisfactory performance regarding economic policies and payments to the IMF during an evaluation period of approximately 12 months from the date of the Board decision.

The Liberian authorities have made considerable progress in implementing its economic program monitored by IMF staff. Macroeconomic developments have been broadly favorable, with GDP growth expected to continue to recover to about 8 percent and inflation projected to be in the single digits in 2006. Financial management has been significantly strengthened under the new government, with strict adherence to a commitment control system designed to ensure that expenditures do not exceed available revenues. The financial position of the Central Bank of Liberia also has improved, and a cash-based balanced budget for fiscal year 2006/07 was approved in late August. Liberia also has made monthly token payments to the IMF.

Today's Board decision is the first step in a process of de-escalation of the remedial measures that have been applied to Liberia. The de-escalation process is designed to encourage members with protracted arrears to the IMF to establish a solid record of policy performance and payments to the IMF, with the ultimate objective of full clearance of arrears and regaining access to IMF financial resources. Substantial financial support from the international community for clearance of arrears and debt relief for Liberia will be needed.

After the Executive Board discussion, John Lipsky, First Deputy Managing Director of the IMF, made the following statement: "Liberia has established an encouraging track record of policy cooperation and payments under the staff-monitored program that began in February 2006. The authorities have committed to further strengthening cooperation with the IMF in terms of both policy and continued payments. This would allow the IMF to give consideration to further de-escalate the remedial measures and, with adequate financing assurances, a possible rights accumulation program aimed at clearing Liberia's arrears to the IMF. These actions could pave the way for Liberia to benefit from debt relief under the Highly Indebted Poor Country Initiative and the Multilateral Debt Relief Initiative."